Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today filed a federal civil enforcement action charging defendants Donald A. Newell of Glenview, Ill., and his Chicago-based company, Quiddity, LLC, with engaging in a scheme that fraudulently allocated commodity futures and options trades to benefit a corporate proprietary account, at the expense of customer accounts managed and traded by Quiddity. Newell owns and controls Quiddity and is a registered Associated Person of Quiddity, which is a registered Commodity Pool Operator and Commodity Trading Advisor.

The CFTC complaint, filed in the U.S. District Court for the Northern District of Illinois, alleges that since at least October 15, 2008, and continuing through at least March 19, 2009, Newell’s fraudulent scheme to allocate profitable trades to his corporate proprietary account resulted in a net profit of over $1.1 million for the proprietary account to the detriment of Quiddity’s customers. The complaint also alleges that Newell and Quiddity failed to keep required records and that Newell made material false statements to the CFTC during investigative testimony in September and October of 2011.

Specifically, the complaint alleges that Quiddity, through Newell, entered orders for trades with Futures Commission Merchants without providing the specific account numbers to which the executed trades were to be allocated. Defendants allegedly waited to see whether the trades were profitable or if the market had moved favorably to an open position before allocating the trades. During the period, 85 percent of the trades that defendants allegedly allocated to their proprietary account post-execution were profitable. Newell falsely testified to the CFTC that he provided account numbers when placing orders, according to the complaint.

The defendants also allegedly failed to retain records sufficient to demonstrate that allocations of trades were fair and equitable, and to permit the reconstruction of the handling of the order from the time of placement by the account manager to the allocation to individual accounts, as required by CFTC regulations.

In its continuing litigation, the CFTC seeks restitution to defrauded customers, a return of ill-gotten gains, civil monetary penalties, trading and registration bans, and permanent injunctions against further violations of federal commodities laws.

The CFTC appreciates the assistance of the National Futures Association.